Saving the World from Godzillas: The Bretton Woods Conference

Tue, 18 Oct 2011 16:43:06 GMT

INET presents you a fascinating video that refreshes our memory of the INET Annual Conference in Bretton Woods last April. Click here to watch it.

Can Goldman Sachs fail?

That was the question MIT economics professor and INET Advisory Board member Simon Johnson asked a packed house at the Institute’s April 2011 annual conference in Bretton Woods, New Hampshire. The crowd was silent. Not a single hand went up. Johnson’s point was made. “It can’t happen,” he said. “I wouldn’t allow it to fail if it was my decision. You wouldn’t either. It’s too scary.”

Why? What makes the failure of a bank like Goldman Sachs so terrifying? Simply put, the economic dangers posed by “too big to fail” banks remain very real. As Andrew Sheng, chief adviser to China’s Banking Regulatory Commission, colorfully put it, “They are so powerful they are essentially Godzillas.” But these Godzillas aren’t destroying Tokyo. Instead it’s free market principles that they want to crush. “The idea of the free market is a myth,” Sheng added. If the five largest Godzillas control a hefty fraction of trading, “is that a free market?”

“New economic thinking has to challenge assumptions about objectives as well as means and question in particular the dominant tenets of the last 30 years,” Adair Lord Turner, head of the U.K.’s Financial Services Authority, boldly declared.